Hard Brexit May Stop Toyota Production

October 25, 2018
Hard Brexit May Stop Toyota Production

Toyota’s just-in-time production stands at risk with the looming “hard Brexit” in March 2019.

Last year, the Burnaston plant in the U.K. made nearly 150,000 cars, and 90 percent were sent to EU nations.  Normally parts are delivered every 37 minutes but if these parts are held up in Customs in Dover and Calais when Brexit kicks in, production could stop for hours or even months.

Other auto makers express similar concerns and are developing alternatives and contingency plans.

Video Spotlight: Toyota Europe CEO: We face logistics problems in case of hard Brexit

This post is based on The Bloomberg article, Carmakers in Paris Issue Stark Warning on Risk of No-Deal Brexit, by Oliver Sachgua, Elisabeth Behrmann, and Tara Patel, October 2, 2018; and The Newswheel article, Toyota warns “No-Deal” Brexit would lead to unprecedented production stalls, by the editor, September 29, 2018; and the YouTube video, Toyota Europe CEO: We face logistics problems in case of hard Brexit | Squawk Box Europe by CNBC Life, October 2, 2018. Image source: Shutterstock / nito.

Discussion Question:

1. Why is a just-in-time system more at risk with a hard Brexit than a traditional batch-push or make-to-stock system?

Guidance: In a just-in-time system, little inventory is held.  Rather, it is pulled through the system by demand.  Small, frequent deliveries of parts are made, as small lot sizes are produced, with the ideal lot size being one unit.

At the Toyota plant in Burnaston, only a four-hour supply of parts is kept on hand.  Parts are constantly restocked, with an average of 50 trucks delivering parts into the U.K. from the EU every day.  Holding more inventory to try to offset delays in deliveries would increase Toyota’s costs.  Both jobs and production would be lost as well due to work stoppages if inventory is not delivered on time.


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